Tata Steel exits NatSteel at a loss

Tata Steel has exited its 17-year long investment in NatSteel holding at a loss.

T.S. Global Holdings (TSGH) Singapore—a 100% indirect subsidiary of the steel major—has entered into a definitive agreement with TopTip Holding to divest its entire equity stake in NatSteel Holdings for an equity value of $172 million (₹1,275 crore). Tata Steel had acquired NatSteel Singapore for ₹1,313 crore in 2004. TopTip Holding is a Singapore-based steel and iron ore trading company.

In a filing to exchanges on Thursday, Tata Steel said based on the historical performance of the transacted business, the enterprise value to EBITDA works out to 13 times. The stock closed 0.54% lower at ₹1,288.55 on Thursday.

The proceeds from the deal will be used to reduce the company’s offshore debt from its overall debt of ₹73,973 crore (as of June 2021). In FY22, it plans to repay over $2 billion in gross debt by prioritising offshore debt pre-payment.

The conglomerate has, however, retained Siam Industrial Wires, the wires business of NatSteel in Thailand, as part of its downstream wires portfolio. Siam is a member of NatSteel Holdings and a wholly-owned subsidiary of the Tata Steel group.

In 2019, Tata Steel had called off its plans to sell 70% in its South East Asia business to Chinese firm HBIS Group for $327 million in cash. Operating profit at the Southeast Asia business increased by 105% on-quarter to ₹295 crore ($40.27 million) in Q4FY21. The company expects infrastructure projects in Thailand to lead to an increase in steel consumption to 18-18.5 million tonnes in 2021.

In Q1FY22, Tata Steel’s revenues had doubled to Rs 53,372 crore year-on-year—owing to a robust performance in its European business. Its domestic operations were backed by improved prices and better realisation offsetting lower deliveries owing to partial unlocking, impacting steel consuming sectors.